Maybe, just maybe, this whole bond rout is ending.
The global selloff that’s set investors on edge finally slowed last week, and some analysts are saying the worst is over. Treasuries look fairly valued given the outlook for inflation and interest rates, according to Bank of America Corp. -- although with plenty of caveats. In Germany, options traders convinced a bund-market crash was all but inevitable less than two weeks ago have scaled back most of those bets.
Goldman Sachs Group Inc. warns that government debt is still expensive, but a growing number of investors are finding value after the four-week exodus sent yields soaring. Prudential Financial Inc.’s Robert Tipp is buying because tepid U.S. growth will keep the Federal Reserve on hold, while Europe remains too weak to sustain higher yields.
And don’t forget about central banks in Europe and Japan, which are buying billions of dollars in bonds each month.
“There’s a good chance people will look back at this as having been a good buying opportunity,” Tipp, the chief investment strategist at Prudential’s fixed-income unit, which manages $560 billion, said from Newark, New Jersey.
Ten-year U.S. notes posted their first weekly gains since April 17, while German bunds pared some of their losses.
That lessened the pain of a selloff that lopped off hundreds of billions in market value from sovereign debt in the developed world, data compiled by Bloomberg show.
Long Shot
The retreat first began in Europe as signs of inflation emerged with the ECB’s most-aggressive quantitative easing yet. Yields surged, especially in markets such as Germany where negative rates prevailed, then quickly spread around the world as DoubleLine Capital’s Jeffrey Gundlach and Federal Reserve Chair Janet Yellen suggested bonds were overpriced.
Yields on 10-year Treasuries, which reached a low of 1.82 percent in April, rose to 2.36 percent on May 12 before ending the week at 2.14 percent.